S.F. CDC LLC v. Webcor Cosntr. LP, No. A156669 (D1d1 Mar. 19, 2021)
This is a claim under Business & Professions Code § 7031(b) for disgorgement of more than $100 million compensation paid to an allegedly unlicensed construction contractor. The trial court granted a demurrer, finding that the claim was barred by the one-year statute of limitations in Code of Civil Procedure § 340(a), which applies to claims for statutory penalties.
Plaintiff tries to argue that § 338’s three-year statute for restitution claims should apply instead. But a § 7031 claim isn’t really restitution. It is a super harsh penalty, meant to coerce contractors to keep licensed, that applies regardless of any harm to the plaintiff. That the amount to be disgorged equals what was paid does not make it a form of restitution.
Similarly, because § 7031 doesn’t require any harm, the discovery rule won’t apply to the accrual of disgorgement claim. A contractor is either licensed or not and its licensure status is a matter of public record. If a customer doesn’t figure out the issue within a year of the completion of the work, they just forego a claim for disgorgement.
The court also affirms an award of contractual attorneys’ fees to the contractor. Whether fees are recoverable depends on the language of the contract—some contracts permit recovery on only contract claims. Others permit recovery for torts too. This isn’t a claim for breach of contract. But the fee provision says that a prevailing party can get fees if an action is commenced “because of the breach by either party.” The court reads “because of” to extend beyond just breach claims to claims with some causal relationship to a breach. Here, the contract included Contractor’s representations that it was properly licensed and the property owner’s complaint repeatedly invoked that provision. That being the case, the Court of Appeal finds an adequate connection between the claim to the contract, and thus affirms the fee award in the contractor’s favor.
Affirmed.
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